BCREA forecasts transition year for BC housing market

The British Columbia Real Estate Association (BCREA) released its 2013 Second Quarter Housing Forecast on May 8, 2013.

For the Greater Vancouver area, BCREA is forecasting a 4.5 per cent increase to 26,600 MLS® residential sales for 2013 and an increase of 10.5 per cent for 2014. The average MLS® residential price is forecast to remain virtually unchanged through 2014 and 2015.

"Stricter mortgage credit regulation combined with slower economic growth has kept BC home sales at a cyclical low over the past three quarters," said Cameron Muir, BCREA Chief Economist. "However, a faster growing economy is expected during the second half of the year and through 2014 which will support a growth trend in provincial housing demand.

"BC average home price forecast is revised upward for 2013, from a decline of 1 per cent to remaining unchanged, as a result of stronger than expected market conditions in Vancouver," added Muir. The average MLS® residential price in BC is forecast at $515,800 this year, before rising 1.7 per cent to $524,500 in 2014.

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REBGV forecast summary

Consumer demand in the province’s largest market trended at a cyclical low during the first quarter. Tighter mortgage credit regulation introduced last summer had the predictable impact of squeezing some first-time and early move-up buyers out of the market. In addition, economic expansion slowed over the last few quarters, pulling back job growth and consumer confidence. In BCREA’s view, 2013 is going to be a transition year both in the economy and the housing market as the present weakness gives way to stronger economic growth at home and abroad over the second half of this year and into 2014.

In addition, after nine months of anemic unit sales, pent-up demand is likely latent in the market. MLS® residential sales are forecast to increase 4.5 per cent to 26,600 units in 2013, and rise by 10.5 per cent to 29,400 units in 2014. Market conditions in Vancouver improved over the first quarter, with the ratio of sales-to-active listings trending from 9.7 per cent in January to 14.4 per cent in March. In addition, new residential listings were down 13 per cent during the first quarter compared to the same period last year.

Balanced conditions, in spite of a cyclical low demand, is strong evidence that Vancouver households are in relatively strong financial shape and that many potential home sellers have been taking a wait-and-see approach alongside homebuyers. The average MLS® residential price is forecast to remain virtually unchanged through 2014.

New home construction in the Vancouver Census Metropolitan Area (CMA) increased 6.6 per cent in 2012 to 19,027 total units, the highest level of building activity since 2008. With consumer demand not rising to meet the supply, some imbalance between supply and demand has led to growing inventories of complete and unoccupied units. An elevated inventory of new homes, combined with tempered consumer demand, will likely lead to some projects being pushed back. As a result, BCREA forecasts a decline of 7.3 per cent in multiple starts to 14,500 units this year, with single family units rising modestly to 3,600 units.

The full BCREA Housing Forecast is available on their web site at bcrea.bc.ca.